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3. HO-00-08

Form HO 00 08: Homeowners 8 - Modified Coverage Form

The Homeowners 8 - Modified Coverage Form (HO 00 08) is a specialized insurance policy designed to provide basic, named perils coverage for owner-occupied dwellings that may not qualify for other, more comprehensive homeowners forms. Its primary purpose is to offer an affordable insurance option for older homes where the replacement cost significantly exceeds the home's market value, or for homes with unique construction materials or architectural features that would be prohibitively expensive to replace to their original standard. This form typically provides coverage on an actual cash value (ACV) basis for losses to the dwelling and other structures, meaning the policy will pay the replacement cost less depreciation. Some states may mandate ACV loss settlement, while others allow for repair cost valuation. Personal property is also generally covered on an ACV basis.

Classes of Business It Applies To

The HO 00 08 is specifically tailored for owner-occupants of dwellings that have a replacement cost that is substantially higher than their market value. This often includes:

• Older Homes: Dwellings built many years ago (e.g., pre-1950s or more than 40 years old) often fall into this category. For example, a Victorian-era home with ornate, custom woodwork and plaster walls might have a replacement cost far exceeding what it could sell for in the current market.
• Architecturally Significant or Historic Homes: Properties that are designated historic landmarks or possess unique architectural designs often have high restoration costs due to specialized materials and craftsmanship. The HO 00 08 provides a more practical coverage solution than a replacement cost policy in these scenarios.
• Homes in Declining Neighborhoods: In some cases, the market value of a home may be depressed due to its location, even if the structure itself is sound. The HO 00 08 can offer a more appropriate level of coverage.
• Properties Ineligible for Other Forms: Some homes may not meet the underwriting criteria for broader forms like the HO 00 03 (Special Form) due to age, condition, or other risk factors. FAIR Plans or other residual market mechanisms may utilize the HO 00 08 for properties that cannot obtain coverage in the standard market.

Special Considerations

There are several important factors to consider when evaluating the suitability of the HO 00 08:

• Named Perils Coverage: Unlike "open peril" policies that cover all losses except those specifically excluded, the HO 00 08 only covers losses caused by perils explicitly listed in the policy. These typically include fire or lightning, windstorm or hail, explosion, riot or civil commotion, aircraft, vehicles, smoke, vandalism or malicious mischief, theft, and volcanic eruption.
• Actual Cash Value (ACV) or Repair Cost Settlement: The primary loss settlement method for the dwelling and other structures is usually ACV, though some policies may offer repair cost settlement (the cost to repair or replace with common construction materials and methods). This is a key differentiator from other homeowners forms that often provide replacement cost value (RCV) if certain insurance-to-value requirements are met. The intent is indemnification, not betterment. Endorsement HO 04 81 may be used in states requiring ACV loss adjustment.
• Theft Coverage Limitations: Theft coverage under the HO 00 08 is typically more restrictive than other homeowners forms. For instance, there's often a lower aggregate limit for theft losses (e.g., $1,000), and it may only apply to property on the residence premises. Special limits for items like jewelry, firearms, or silverware found in other HO forms may not be present, with the overall theft limit applying to all types of property. The HO 04 30 endorsement can be used to increase the on-premises theft limit and add off-premises theft coverage.
• Coverage Restrictions: The HO 00 08 generally provides fewer additional coverages and may have lower sub-limits for certain items compared to forms like the HO 00 02 or HO 00 03. For example, the limit for trees, shrubs, or plants is often lower (e.g., $250 per item vs. $500). It also may not include additional coverages like collapse or coverage for a landlord's furnishings found in other forms. Smoke damage coverage may exclude smoke from fireplaces.
• Eligibility Requirements: Insurers will have specific underwriting guidelines for the HO 00 08. These may include requirements that the property is owner-occupied, not vacant for an extended period (e.g., more than 30 or 60 days), free of unrepaired damage, and meets a minimum dwelling coverage amount (e.g., $15,000). Some insurers may only offer HO 00 08 for seasonal or unoccupied risks in certain areas if they lack security systems.
• Related Forms: The HO DS 08 is a related declarations page for the HO 00 08. Various endorsements can modify the HO 00 08, such as those for actual cash value loss settlement (HO 04 81) or increasing theft limits (HO 04 30).

Key Information for Agents and Underwriters

Agents and underwriters should be mindful of the following when dealing with the HO 00 08:

• Pricing and Risk Assessment: The HO 00 08 is generally less expensive than broader homeowners forms due to its named perils coverage and ACV loss settlement. However, the unique nature of the properties it covers (older, potentially higher-risk homes) requires careful risk assessment. Underwriters should scrutinize the age, condition, construction materials, and any existing hazards of the dwelling. The valuation of the dwelling is critical; it should reflect the actual cash value or the cost to repair/replace with common materials, not necessarily the market value or full replacement cost of original, ornate features.
• Coverage Gaps: It's crucial for agents to clearly explain the limitations of the HO 00 08 to clients, particularly the named perils basis, ACV settlement, and restricted theft coverage. Clients should understand that this form provides basic protection and may not cover all potential losses that more comprehensive policies would. For example, damage from falling objects or water damage from burst pipes (other than the ensuing fire or explosion) might not be covered.
• Underwriting Guidelines: Insurers often have strict underwriting criteria for the HO 00 08. This can include minimum and maximum coverage limits for the dwelling. Properties with excessive liability exposures (e.g., unfenced pools, trampolines) might still be eligible for an HO 00 08 when they wouldn't qualify for other forms, or liability might be excluded. The property must typically be the owner's primary residence, though seasonal use may be permissible under certain conditions. Unrepaired damage or ongoing litigation related to the property can render it ineligible.
• Endorsements: While the base HO 00 08 is restrictive, certain endorsements can modify coverage. For example, the HO 04 30 can increase theft coverage limits. Some insurers may offer an endorsement to provide replacement cost coverage on the dwelling, but this would typically require insuring the dwelling to 100% of its replacement cost. Agents should be aware of available endorsements and when they might be appropriate for a client.
• Market of Last Resort: The HO 00 08 is often utilized by FAIR Plans or other state-run insurance pools for properties that cannot secure coverage in the voluntary market. This underscores its role in providing essential insurance for challenging risks.